Reliance Jio expands rate war to postpaid segment

NEW DELHI: Reliance Jio Infocomm has expanded the tariff war to the post-paid segment, launching a plan at almost half the price and with more data than those offered by its rivals.

Although such users account for 5% of the country’s more than 1 billion mobile phone subscribers, they contribute some 25% to the industry’s revenue.

The telecom arm of Mukesh Ambani-controlled Reliance Industries will start offering the Rs 199 a month plan to consumers from May 15, which will include 25 GB of data, international calls starting at 50 paise per minute and international roaming at Rs 2 each per minute of voice, per MB of data and per text message, besides free access to all Jio apps.

JioPostpaid rates “once again challenge the industry status quo by offering the lowest tariffs in India and abroad to the post-paid users, who end up paying disproportionately higher as compared to the prepaid segment,” the company said in a statement Thursday.

The average revenue per user (ARPU) for pre-paid customers is typically about Rs 150, while that of the more-sticky post-paid customers is over three times higher at roughly Rs 500 a month, making them a must-have for operators already under severe revenue and margin pressures.

With bundled offers, though, the difference between post- and pre-paid ARPUs would have reduced, said an analyst who did not want to be identified.

As per industry experts, Jio’s tariff of Rs 199 is close to the level offered to pre-paid subscribers.

“Rs 199 is probably the lowest,” an analyst said, speaking on condition of anonymity and indicating that other operators “need to be worried.”

The post-paid tariffs of Bharti Airtel, Vodafone India and Idea Cellular offering 20 GB of data start at Rs 389 or Rs 399, with international roaming rental of Rs 149 a month.

“Further price cuts cannot be ruled out given focus remains on market share (at least for Jio/Airtel) but rising 4G affordability is boosting 4G adds, which should cushion hit on industry revenue,” analysts at Citi Research Equities said in a note to clients dated May 6.

Industry executives predicted the pressure on tariffs will continue for another three to four quarters.

With tariffs and ARPUs falling due to free voice and a glut of data on offer by Jio, revenue streams such as international rentals, calling and messaging were the only saving grace for rival carriers. Now, this will also come under competitive pressure.

“International roamers tend to be top-of-the-bracket customers for telcos and accordingly, in the current scenario, all operators will be vying to ensure that they retain these customers or acquire the new ones,” said Mritunjay Kapur, head of telecom, media and technology practice at KPMG India.

It is most important to retain or acquire these customers because they provide the highest return on investments, Kapur said, adding that a key aspect was that post-paid customers have a lower churn with higher ARPU, thus offering more margins.

Jio has looked at customers on a mass scale and they have often not been sticky. Now that the company appears to have reached sufficient user numbers – 186 million as of March – the main test lies in getting subscribers in the higher ARPU category, sector experts said.

A senior partner at a research firm said that Jio had no option but to go with a very low entry point for its tariffs since it is difficult to get customers to move from another operator permanently. Many of these are international service users “and that segment is on the rise… It is therefore crucial for Jio to attract this lot,” the partner said.